As many players across the global travel industry transition
from survival mode to recovery mode, the spotlight has been on the giant
intermediaries and what, if anything, they are doing to aid suppliers in their revival.
The answers are varied. Some, like Booking Holdings, have
thus far not released information publicly about partner recovery plans. In
late March, Google announced it had earmarked $340 million in ad credits for
small- and medium-size businesses with Google Ads accounts, and the following
month it expanded a trial pay-per-stay payment option for Google Hotel Ads.
Airbnb has allotted $250 million to help hosts who have lost money due to COVID-19-related
cancellations. And on May 28, Expedia Group announced a $275 million partner
recovery program, with $250 million of that coming in the form of marketing
credits and a temporary reduction in commission for lodging partners.
We talked to industry experts about Expedia Group’s plan to
assess the benefits – and risks. All of those we spoke to agree that in these
incredibly difficult and unprecedented times, any help is better than no help. But
they also say hoteliers should that choose to participate need to go into it
with their eyes wide open.
“This is definitely not a charitable offer by Expedia,” says
Klaus Kohlmayr, chief evangelist at IDeaS.
Give and take
The crux of the benefits for lodging partners are twofold: marketing
credits valued at 25% of the compensation Expedia Group earned from that property
that can be spent on the online travel agency’s ad products, and a 10% reduction
in commission on all new bookings for three months.
for those benefits, partners must agree to provide Expedia Group with their lowest
retail rates, competitive pricing on packages and member-only deals. And that’s
a big ask says Infinito founder Fabian Bartnick.
“This is a
question of power and control,” Bartnick says.
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“If Expedia gets more and more access to more and more
information that they don’t normally have access to, they can use that
information to make better decisions – and better decisions not for the hotel but
in order to make more revenue for Expedia. And you can’t fault them for that.”
Despite that, hoteliers - especially independent properties
and small chains that may have eliminated or reduced marketing staffs and
budgets – no doubt will appreciate the credits Expedia Group is offering. (The
commission reduction, our experts agree, has little value since it is only 10%
and booking volume currently is so low.)
But hospitality and online travel strategist Max
Starkov says hotels need to recognize what they are giving up in exchange for
participation in the program.
“Your dependency on Expedia will grow exponentially. Because
you’ve got nothing to offer of any value to a direct customer. You are giving Expedia
the bragging rights to say we have the lowest rates, the best packages and
member only rates,” he says.
“But it’s like scraps from the table that Expedia is
throwing at them ... better than nothing.”
Starkov says it’s the same dynamic that developed in the
wake of previous crises such as 9/11 – independent hoteliers “begging the OTAs
for more business.”
“Even the name independent is kind of funny nowadays. You simply
have branded hotels and dependent-on-the-OTA hotels. That’s unfortunate but that’s
what it is.”
Bartnick says this temporary boost can create a “sugar rush”
for hoteliers. “You give the hotel better visibility, they get more bookings
and then they are hooked,” he says.
Kohlmayr is a bit more optimistic, saying this is a valuable opportunity for hoteliers to
have the “power of an OTA” behind them, but that they should also balance this with
strategies to drive direct bookings.
“It’s time to demonstrate to customers about the health and
safety measures you are implementing... and the best way to do that is through direct
channels, through social media, through your website and other touch points you have
created with your guests,” he says.
“And you can create your own opaque packages, you can create
things that can attract your most loyal customers to return. You are not 100%
tied to give everything to Expedia.”
Another element of Expedia Group’s recovery plan is a “streamlined
version of its optimized distribution solution” for providing wholesale rates
to third-party travel providers, making it easier for hotels to follow Marriott’s
decision last September to use Expedia Partner Solutions as the exclusive source
for its non-contracted wholesale rates.
The question being asked by experts is how is Expedia Group planning
to use those wholesale rates.
This is definitely not a charitable offer by Expedia.
Klaus Kohlmayr - IDeaS
“So as long as Expedia adheres to the packaging of those
rates together with air, car and anything else that goes into an experience
than I feel it would be ok,” Kohlmayr says.
“If they go down the road of taking those wholesale rates
and displaying them on their own, that would create a lot of problems for its
Bartnick says the wholesale distribution feature is a “brilliant
move” on Expedia Group’s part to further position itself between hotels and other
resellers. But while Expedia Group describes this streamlined distribution as “designed
to increase revenue by favorably positioning supply partners' inventory,”
Bartnick questions whether that means increase revenue for the hotels or for
“If you have the entire rate spectrum at your
disposable, you can essentially just put a couple of fences so nobody would actually
know when and how you are starting to sell rates and at times even take a loss
on the rate just to keep the guest over another OTA,” he says.
“And why do you want wholesale rates right now? You already
have the ability on the extranet to set a discounted rate to your normal rates
that would only be sold through packages or any kind of bundles that would hide
the room rate. So if that already exists why do I need to give you [Expedia
Group] access to another discounted rate that is designed for a hotel bed or
agent down the block. It doesn’t make sense.”
With leisure travel driving the recovery in markets that are
opening around the world, Starkov predicts the major hotel chains will need to
rely on OTAs more than usual so, like independents, they too will want to
participate in this recovery program.
“The major hotel chains unfortunately - with all of their
savviness and brand appeal and loyalty programs - still have to master leisure
travel,” he says.
“The OTAs are the ones that are the masters of leisure
travel, and under the current circumstances when business travel will not
rebound any time soon... the big chains will be reliant more on the OTAs.”
But rather than agreeing to the partner recovery program
requirements as presented, Starkov says brands such as Marriott, Hilton and IHG
are likely talking to Expedia Group about additional concessions and custom
agreements. As the crisis eases, he says major chains will regain control of
their distribution and will also benefit from an increase in independent hotels
wanting to convert to their soft-brand collections.
“For independents, their fate is very dire,” he says.
“This new program is a very clever additional entanglement
of hoteliers to Expedia. And they do not disclose who is participating, but they
say all of your competitors are already in. They are exploiting the fear of
missing out. This is the modus operandi of the OTAs, and exactly the same thing
is happening right now with this program.”